Harrods department store in London. [Suzanne Plunkett / Bloomberg]
SHANGHAI - London-based luxury department store Harrods is holding talks with the Shanghai municipal government on the opening of its first store outside the United Kingdom in the historic Bund area.
The British emporium is keen on opening a department store in one of the imposing buildings where British banks and merchant houses once traded, a real estate agent familiar with Harrods' plan said.
But the choices for the British retailer are limited to only a few locations that are large enough for Harrods, which operates one of London's largest department stores.
Its proposed venture in China was initiated by Managing Director Michael Ward.
"China is the most probable, but we would have to do a lot of work first," Ward was quoted as saying by The Guardian.
Hannah Hodges, Harrods' corporate affairs manager said: "However, no plans have been confirmed to open a store in Shanghai."
Harrods is already a well-know purveyor of luxury goods among well-to-do Chinese consumers who make frequent overseas shopping trips every year.
The Guardian reported that the number of Chinese travelers who shopped at Harrods in the first six months of this year rose 125 percent year-on-year.
Eugene Tang, head of retail at Jones Lang LaSalle in China, said he was aware of talks about Harrods' Shanghai outlet, but he estimated that it would take a long time before any lease agreement can be concluded.
"We don't expect to see the opening of Harrods in Shanghai in the next couple of years," said Tang. "It will take much longer for them to get things right before the opening," he added.
Negotiations between Harrods and potential Chinese partners will take one year, and another year-and-a-half will be spent on design, decoration and stocking," said Tang.
Harrods' move to China is seen as a break with tradition for such a high-end retailer.
"Renowned for their conservative business philosophy, most premier British retail brands don't go overseas for expansion," said Regina Yang, an analyst with Knight Frank, a leading property consultancy.
But other British retailers have already made a dash for the yuan.
Marks & Spencer opened its second store in Shanghai's Yuyuan Garden last month, and it is already scouting for premises for its third branch, according to Yang.
Although luxury goods are relatively cheaper in Hong Kong, Europe and the United States, many mainland consumers who are not outfitting their entire wardrobes with designer clothing prefer the convenience of making occasional purchases at local stores, Yang said.
High-end brands such as Louis Vuitton, Zegna, Gucci, Dior, Tiffany, Hermes and Prada all opened stores in Shanghai between April and June to meet luxury buyers' ballooning demand.
China has overtaken the US to become the world's second-largest luxury goods market, with Japan holding the top spot. Sales of luxury goods in China grew 12 percent in 2009 to $9.6 billion, accounting for 27.5 percent of the global market, according to Bain & Co.
In the next five years, China's luxury spending will increase to $14.6 billion, making it the world's largest luxury market.
The landmark London department store Harrods was acquired by Qatar Holdings on May 8 for 1.5 billion pounds from Egyptian billionaire Mohammed al-Fayed. Harrods, in London's Knightsbridge district, has over 90,000 square meters of retail space across more than 330 departments.
